Reading tea leaves
Good things don't last forever
To be a great investor, you have to look forward to what's coming up on the horizon.
It's not easy to do.
In behavioral economics, the study of psychology as it relates to the economic decision-making processes, "Recency bias" is a major blindspot that impacts most investors.
What is Recency bias?
Recency bias, is a cognitive error identified in behavioral economics whereby people incorrectly believe that recent events will occur again soon.
Why do humans struggle with Recency bias?
I can't tell you 100% on why this is happening.
As someone who loves to study human psychology, I would guess it has to do with survival.
Our human brain has been programmed to do 1 thing really well - to help us survive.
That's kind of important.
Actually, REALLY important.
If we don't survive, nothing else really matters.
However, survival happened to be really bad for us when it comes to investing.
.
Investing is all about the future.
Survival is all about today.
Be able to remember something recent will help us survive, but it doesn't help us thrive!
What does this have anything to do with investing in real estate?
For the past 7 years, we have seen a dramatic increase of public sector employment especially with the Federal government.
Source: Global News
Source: The Hub
Bryan Passifiume wrote on National Post:
The size of Canada’s public service has ballooned by 42 per cent since the 2015 election of Prime Minister Justin Trudeau, while Canada’s population increased by around 14 per cent.
As a percentage increase, the increase of public sector employment from the Federal government is across the board for most Provinces.
As the number of employment, the biggest increase is in the NCR - National Capital Region.
It makes sense, considering the Federal government is based in Ottawa, part of the National Capital Region.
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As the Federal government payroll expands dramatically, the employment has increased 44.9% in the NCR area.
Source: Global News
That means, Ottawa real estate market has benefitted from the "tail wind" of the Federal government.
More government jobs =>Â
More people moving to the area =>Â
More demand for housing =>Â
Higher real estate prices
That's basically the formula for the Ottawa real estate market in the past 7 years.
.
How does the Recency bias come into play?
If you're an investor in the Ottawa real estate market for the past few years, most likely you have made some pretty pennies on your portfolio.
It's easy to expect that kind of ROI to continue...
Except, like I said at the beginning of the newsletter:
To be a great investor, you have to look forward to what's coming up on the horizon.
Consider this:
Pierre Poilievre is running on a platform of cutting red tapes and reducing bureaucracy.
If the Conservatives get elected in the next election, what could happen to the Federal government payroll?
What would happen if the Conservatives reduces Federal deficit by cutting Federal government jobs?
What would happen to the Ottawa real estate market if there are less people employed by the Federal government?
According to the recent Ipsos poll, Trudeau's approval rate is at a low 33% while Pierre Poilievre is leading the polls at 45%.
I don't have a crystal ball, but if it's me, I would not want to be investing in Ottawa today or tomorrow.
.
Ottawa investors had years of great returns thanks to the Federal government.
As I read the tealeaves, the song "Good Things Don't Last Forever" by Ecstasy, Passion & Pain sung it best...
Good things, good things
Don't last forever
Hey, don't you know, yeah
Good things, good things
Don't last forever
No, no, no, no
Good things, good things
Don't last forever
That's what I'm talking bout, boy
Good things, good things
Don't last forever
That's what my mama told meÂ
Speaking of politics...
I'm getting close to launching another newsletter for investors who are building a 7 to 8 figure real estate portfolio.
As I'm gearing up for the launch, I'll be hosting a special webinar on the US election night this coming Tuesday November 5: How the next US President will impact your portfolio.
If you are concerned about how the next US President could affect your portfolio, you won't want to miss this webinar where I'll show you data, charts, analysis, and my prediction on what's to come.
Register to attend here:
https://us06web.zoom.us/meeting/register/tZ0odeupqjIpH9a7CbCfvlQqeizSs6XKFTDk
If you like my work, I invite you to share it with others.
Happy investing,
Eric Chang
Canmore, Alberta
October 29, 2024
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